Retailers are ending the summer on a high and are feeling more confident than at any time in the last 12 years following a sales surge in August.

Optimism within the industry about business prospects for the coming three months was the strongest since May 2002, the CBI said in its latest snapshot of the retail sector.

Katja Hall, the business lobby group's deputy director general, said: "The high streets have been bustling with shoppers this summer and it is good to see firms so optimistic about their business prospects for the next three months – higher than at any time since 2002. Retailers looking forward to stronger growth in September are keeping their shelves well stocked in anticipation."

Strong high-street sales were matched by an increase in consumer confidence in August, with market research group GfK's monthly tracker of the nation's mood taking it back into positive territory for only the second time since March 2005. The index rose by three points to 1 from -2 in July, matching June's level.

Nick Moon, managing director of social research at GfK, said the index suggested consumer confidence had moved into a new period of stability.

"There is no guarantee how long this stable position will last – a rush of good or bad economic news could set off a marked rise or fall, but things could stay like this for a while," he said.

Of the 142 firms surveyed in the CBI's distributive trades survey, a balance of +25% of retailers expected their overall business situation to improve over the next three months, which was the highest since May 2002.

The CBI added that 51% said sales in August were up on a year ago, while 14% said they were down. That gave a balance of +37%, up on July's +21% and matching February's 21-month high. It was better than the +27% forecast by economists.

There were mixed fortunes for retailers, with sales volumes rising particularly strongly among grocers, chemists and furniture and carpet sellers. Specialist food and drink retailers, on the other hand, reported a fall in sales.

The number of retail jobs created grew at the fastest pace since November in August, with a balance of +12% firms reporting higher employment than a year ago.

Paul Hollingsworth, economist at Capital Economics, said the survey was encouraging. "[It is] an encouraging sign that the recovery in consumer spending retained plenty of momentum in the third quarter.

"There are some doubts as to whether or not consumers can sustain this pace of spending growth whilst real pay is still falling on an annual basis. However, we remain optimistic that the economic recovery will start to feed into stronger pay growth towards the end of this year."